Question

Bill Jensen deposits $8500 with Bank of America in an investment paying 5% compounded semiannually. Find the interest in 6 years

Answer 1

Amount deposited = $8500

Rate = 5%

time for interest = 6years

Compounded semiannually

The formula for semiannually is

`A=P(1+(r)/(100n))^(nt)`

From the given information

P = $8500

r = 5

t = 6

Since the investment was compounded semiannually then

n = 2

Substitute the values into the formula

This gives

`A=8500(1+(5)/(100*2))^(6*2)`

Solve for A

`\begin{gathered} A=8500(1+0.025)^(12) \\ A=8500(1.025)^(12) \\ A=11431.56 \end{gathered}`

To find the interest

Recall

`I=A-P`

Where I, is the interest

Hence

`\begin{gathered} I=\text{\$}11431.56-\text{\$}8500 \\ I=\text{\$}2931.56 \end{gathered}`